Magazine article Business Credit

Caution Advised in Southern Europe

Magazine article Business Credit

Caution Advised in Southern Europe

Article excerpt

"Imagine yourself alone and starving. You are on an asphalt street surrounded by concrete-block buildings. The buildings have no doors and no windows. The street is endless. There is no hope..."

This is what a lost pet faces when it's loose in the city. It is also what a credit manager faces when he or she is unprepared to do business in southern European countries.

First and foremost, credit managers need to be aware of the many credit policies and practices they face in the different European countries. These practices stem from three distinct law histories--Anglo Saxon, German, and Latin. Because these traditions run deep, they are likely to remain, the European Community not withstanding.

For example, while a bad check may be written in Germany without any severe consequences for the debtor, in Italy and France such a case is immediately met with a lawsuit. If a judgment is obtained against the debtor and there is no asset upon which to levy execution, the debtor is placed in bankruptcy.

Although signed bills of exchange are a good method of payment for transactions within a given country, a bill of exchange used to pay foreign vendors is another matter. While it will be scrutinized in depth for possible charges in Spain, Portugal, and Italy, there will be fewer problems from Germany, the United Kingdom, and France.

Common terms such as "draft," "check," "bill of exchange," and "letter of credit" have different meanings in each country, so again, it is prudent to understand these differences and know what consequences they will trigger in case of non-payment. …

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